Pressure has been mounting on BIS to prevent the negative consequences associated with some zero hours contracts (ZHCs). New policy recommendations from the Labour Party to address alleged abuses, revised estimates from the ONS suggesting a higher use of ZHCs than anticipated and a critical report from the Scottish Affairs Committee into existing safeguards for ZHC workers have all fuelled an already polarised debate in recent weeks.

In response, the Government has today set out its proposed plan of action. It wants to:

  • ban exclusivity clauses in zero hour contracts;
  • consult further on how to prevent rogue employers evading the exclusivity ban (the example given by the Government is an employer offering a one hour fixed contract by way of evasion);
  • work with employers and unions to develop a code of practice on the fair use of ZHCs by the end of the year;
  • develop improved guidance on ZHCs (for example, providing detailed information about ZHC workers’ employment rights on government websites).

Given next year’s election, it worth noting that the Labour Party has also proposed a number of changes for ZHCs, including the following:

  • no obligation to be available outside contracted hours;
  • a ban on exclusivity;
  • a right to compensation if shifts are cancelled at short notice;
  • transparency over their employment status, terms and conditions;
  • the right to request a contract with a "minimum amount of work" after six months with an employer - this could only be refused if employers could prove their business could not operate any other way;
  • an automatic right to a fixed-hours contract after 12 months with an employer.

The Government’s proposals for ZHCs

Exclusivity

The Government is today introducing draft legislation (in the Small Business, Enterprise and Employment Bill) with the aim of banning the use of exclusivity clauses. Such clauses tie a worker to one employer even when there is no work available. However, as the Government has already conceded by announcing a further consultation on how to prevent unscrupulous employers from seeking to evade this ban, a ban will not be the end of the matter.

In practice, banning exclusivity clauses in ZHCs may have little impact because few employers use them. Instead, the issue appears to be more subtle with Acas highlighting the issue of “effective exclusivity” - where ZHCs workers report being frightened to look for other work in case they are dropped by their employer. The proposed new code of practice and the proposed measures to improve transparency over ZHCs workers’ rights and contracts may prove more effective in this respect than a legislative ban on exclusivity.

In the meantime, attention moves to the wording of the ban in the Bill announced today. The challenge is on for how the Government will construct a legislative approach that works. With no tried and tested statutory definition of a zero hour contract, the potential danger is that any new wording could inadvertently impact on other forms of employment where exclusivity is currently lawful and common practice.

Code of practice and information and guidance on ZHCs

Research suggests that some of the bad practices associated with ZHCs flow from a general lack of understanding, amongst both workers and employers, about the nature of ZHCs including employment status and entitlements. The Government hopes to address this knowledge-gap by making new Government information and guidance on ZHCs widely available together with a new code of practice.

Employers should anticipate increased interest in the employment status and statutory rights of those on ZHCs following the Government’s push on transparency. In anticipation, reviewing employment status, ensuring statutory entitlements are properly granted, including holiday pay, and improving the way that ZHCs are communicated and understood by managers and workers are all sensible precautions to take.